Brian Micklethwait's Blog
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Category archive: Kevin Dowd
On Saturday I went to St Paul’s Cathedral, front of, to hear Kevin Dowd and Gordon Kerr address the Occupy St Paul’s people. In the event I head very little of what they said, Kerr having been and gone before I even got there. But I was very impressed that they did it.
If my time at Occupy St Paul’s was anything to go by, it has all been thoroughly domesticated. Somebody is definitely in charge of this thing, and with a combination of threats and negotiation, a stand-off agreeable to all has been achieved. There is no sense of impending violence. Nobody yelled at me when I wondered about in among the tents, taking photos. Nobody yelled at Kevin or Gordon for spouting Austrian Economics.
Click at will for the big pictures.
My usual preoccupations are in evidence. There are many signs. There are, of course, digital photographers, because I was not the only one taking photos. Many were just photo-ing St Paul’s.
The bloke in the cap taking photos is Nigel Meek, the Editorial and Membership Director of the Libertarian Alliance, who apparently showed up as a result of that Samizdata posting (already linked to above) that I did flagging this up. Afterwards (he told me later) he went out drinking with Kevin and Gordon and had a great afternoon of it.
If this demo is anything to go by, the tent makers have done a good trade.
I nearly included this photo of Kevin Dowd in my Samizdata posting last night about his performance for the Adam Smith Club, but I wanted to get that posting posted more quickly and more briefly than including it would have allowed, so here it is here:
I took that right after Dowd’s speech (it is misleading to call it a mere talk), which was a tour de force of detailed pessimism.
Dowd and Detlev Schlichter are now approximately equal in my estimation, both about as high as it is possible to be, Schlichter for his doggedly Germanic theoretical rigour, Dowd for his command of the details of the disaster as it is actually playing out. A year or so ago, I began to fear that Dowd was missing the forest through concentrating too closely on one of his preferred clutch of trees, namely his scheme to sort the banks out by supervising their bankruptcy instead of just squirting ever more money at them. This scheme sounds good to me, but Dowd sometimes gave off the vibe that he thought this was the heart of the problem and solving it would sort everything. I was, in short, starting to have doubts about having called Dowd one of the most important intellectuals in the world. Last night, such doubts melted away. Which, I now realise, is another reason why Dowd’s talk gave me such profound satisfaction. (See my Samizdata piece for the other reason why Dowd made me cheerful last night.)
The heart of the problem, as Schlichter is now painstakingly explaining to anyone who will listen, and as Dowd made absolutely clear last night that he also understands, is the inevitable forthcoming collapse of all the paper currencies and the need to get the world’s currencies back to gold. Last night was different. Last night Dowd painted the big picture in all its horror, and also found time to allude to What Is To Be Done, as and when the world ever becomes ready to think intelligently about such things.
Schlichter also supplies media brilliance. Dowd is at his best when he is doing his own big, set piece performance, untinterrupted, as he was last night. That way he can deploy detail, yet remain on top of it. Stick him in a TV studio and whichever mere detail the interviewer chooses to ask about is liable to swallow the big picture. Schlichter’s grasp of the big picture is undeviating, and, unlike Dowd, he looks and sounds the part. Schlichter has rationality and fluency and authority and cleverness and been-there-done-thatness and Good Germanness oozing out of every pour. His accent is definitely Germanic but his English impeccable, which is the perfect combination for sounding really clever. Dowd (to quote some words I cut out of my Samizdata posting) looks and sounds more like a man who ought to be wearing a brown coat and working for the Gas Board, rather than like any kind of economic policy Moses. He only looks and sounds impressive if you agree with every word he is saying, as I did last night. But even then there is a mismatch between the extreme excellence of his performance and his helpful and friendly service industry demeanour.
Yes, my friend Kevin Dowd has a new book out, about the financial mess the world is in just now, and it was launched earlier this evening at, as you have perhaps already guessed, the Institute of Economic Affairs:
On the left, the IEA’s new boss Mark Littlewood. Middle left is Kevin Dowd’s co-author Martin Hutchinson. Then there’s Kevin, looking happy, perhaps because being photographed at least twice. And finally there’s Kevin looking a bit angry.
My preliminary guess, based on what I heard the authors say this evening rather than on having read their book (which I have not done yet), is that it will be a good blow by blow account of the catastrophe, but that the What Is To Be Done? bits at the end may cause me to dissent. I suspect the authors of being too keen on saying how to run this particular nationalised industry differently and better, but not keen enough to say that the root of the problem is that it is nationalised.
They identify lots of bad ideas that have been swilling about in the world of high finance. But bad ideas are to be found swilling about everywhere. Why is it that these bad ideas did such damage in this particular industry? Other industries have been making rapid progress of a sort that shows no sign of stopping, despite there being plenty of bad ideas around about how they should operate too. So, why the difference?
The above prejudices may be quite wrong. As I say, I’ve not read the book yet.
Apart from telling me yesterday about the colourfulness of Eastern European modern concrete architectural abominations, Michael J told me something else. Remember Kevin Dowd, who I was enthusing about earlier in the year? Well, Michael attended the Paris Freedom Fest 2009 a few days ago, and said that Kevin Dowd’s speech, entitled “The Current Financial Crisis: a blueprint for reform” was sensationally good. Dowd’s LA lecture earlier in the year was good, said Michael, but this was something else again. “He called for a revolution!”
The speech was recorded, and Michael has been emailing Christian Michel (scroll down here for more info about him) who is apparently the one who will be shoving it up on the www, to - how to put this? - not delay doing this any longer than is entirely necessary.
Nothing much from me here this weekend, or not since the small hours of Saturday morning. But a couple of bits at Samizdata, about cricket, and about crime (that’s if you agree that Taxation is Theft).
I didn’t hear Kevin Dowd’s lecture live, but I did show up for some of the socialising afterwards, to do a bit of networking and generally to suss out how well it had gone (well). And there I met with James Tyler, who told me then about the speech he was going to give about sound (i.e. free market) money last night at Policy Exchange. This talk got flagged-up beforehand yesterday at Guido’s:
So Guido is looking forward to James Tyler’s speech tonight at Policy Exchange. Little known outside the City’s money markets - in which he is one of the largest and most invisible players - he is going to sound the cry for sound money in terms that Hayek would approve.
I have left this comment, which is now “awaiting moderation”, so I recycle it here:
Well done. Only sorry I couldn’t be there. . . .
That’s right. I wasn’t able to get to this event either.
. . . And congratulations on the mention at Guido’s, which will do wonders for the impact of these wise words. The usual sneer about clevernesses to do with economics, and in particular to do with money, is: If he’s so smart, why ain’t he rich? It would appear that, if what Guido says is right, you are rich.
Time was when a talk like this would sink without any trace beyond the memories of the tiny few true believers present. Now, it gets given, Guido plugs it, and voilà. There’s nothing anyone else can then do to stop it being noticed, because ignoring such a thing is no longer something any one person can now effectively do, however powerful he may still remain. The gates are no longer being kept. When something of potential significance is ignored, that’s something a sufficiently unanimous group of people merely refrain from doing, and such unanimity has now been ended, hopefully for ever.
UPDATE: Comment number one on this is from Guido, and says this:
James Tyler gave a speech to Policy exchange calling for a free banking solution to the credit crisis. He wasn’t shouted down. 10% of the audience supported him.
The not being shouted down bit being just as important as the 10%. You can bet that in among the 90% are a lot of people who are now thinking about the notion, in a way they never had before.
I have spent a lot of today reading the first draft of the expanded, written version of Kevin Dowd’s Lecture about the banking crisis, the good news being that the public version will presumably be available Real Soon Now. And a good thing too, because, the diagrams of how Dowd says the banks ought to be reorganised didn’t (through no fault of his) come out at all well in the video version of his lecture. For that reason, and for other reasons besides like cut-and-pastability, I think a text will make a big difference to this ongoing argument.
My biggest problem with the talk is that I still can’t fully get my head round what happened in Scotland in the age of “free banking”. To me, the phrase could mean two rather distinct things. On the one hand, there is the matter of who is and is not allowed to issue currency in the first place. And on the other, there is the matter of who looks after your money for you (nationalised or competing) and helps you to make payments with it and who receives payments into your bank account for you, pays you interest on what you have deposited, and so on. There is the issuing - and maintaining the value of the - currency itself. And there is all that “banking as the plumbing of the economy” that Dowd talked about.
My understanding is that in Scotland, the latter activity, the banking-as-plumbing, was a completely free market, and worked very well, in fact it lead the world into modern “high street” (i.e. banking-as-plumbing) banking. But how free was the market in currencies in Scotland at that time? What legal tender laws were there? Was “the pound”, as issued by the Scottish banks, a literal pound weight of gold, the same for every bank, which was the only means anyone took seriously of storing and exchanging value? And was “the pound”, in Scotland, a universally followed standard that was the outcome of a totally free market in currencies as well as in banking-as-plumbing, or in some way a legal imposition, however light and deft and rational compared with the much more statist arrangements imposed upon England by London’s politicians and central bankers?
This actually matters quite a lot, because it influences rather profoundly what kinds of changes we should be agitating for in the meantime. I had the feeling, when listening to Dowd, that he was switching back and forth, both in his complaints about the status quo and in his recommendations for improvement, between (a) the claim that banking should not be a nationalised industry in any way whatsoever, currency or banking-as-plumbing, and (b) proposing various preferred ways of running the banking industry, given that it is now very much a nationalised industry which “we” consequently get dragged into arguing about the management of, because “we” own it, and we have to start from here, rather than only talk about alternative free market nirvana that we (as in libertarians) favour.
I put these ruminations here rather than anywhere more public (like Samizdata) because basically I am thinking
allowed aloud (thinking definitely is allowed at Samizdata!) here, reminding myself of my own thoughts, rather than telling anyone else what to think. I am very ready to believe that it is I who am in the muddle here, and am merely projecting my confusions upon Dowd’s lecture. After all, when it comes to banking, whether free market or of any other kind, what do I know? Only that I favour a free market, because markets work in all other economic areas, so why not banking?
I hope, some time soonish, to do a follow up recorded conversation with Professor Dowd, at which point I can ask him questions like these, and any other good questions that others may suggest between now and then.
Meanwhile, for those who miss the cat blogging that I used to do every Friday, here is a picture of the Dowd family cat which I took when I visited them in Sheffield a few weeks back, before the lecture was given:
In the foreground: crocuses, and some green shoots of recovery.
How do you embed videos in blog postings? I’ve never been any good at making that work. So what I did here was “View Page Source” here, and I just copied and pasted what seemed to be the bit that mattered. And then just hoped for the best. Which seemed to work:
Let me know if you are seeing this, i.e. the video embedded in the posting linked to above. More particularly if you are not seeing it. It’s like when people say “hands up those who are not here”, but you presumably get the idea. I will have to post this before I can check how it registers in the two big browsers (I use both IE and Firefox), so apologies in advance if that causes a bit of havoc.
There’s a further clue in the categories list below.
That’s it really. I’ve just watched the first twenty minutes or so. Not having been able to get to the event itself until after the talk had stopped, I am particularly grateful to Sean Gabb for (a) video-ing it at all, and (b) for getting the video up and watchable on the www so quickly. Okay not quickly by the standards of quick people, but in a flash of lightning in Libertarian Alliance time.
Can’t yet comment much on content, but I already very much like the manner of it. Dowd is everything you would want a Northern Rock middle manager to be, and the opposite of what you suspect they mostly now are. Downbeat, charisma-bypassed, unphotogenic, balding, drab northern accent, dry northern sense-of-humour. And that’s all good, if only because he absolutely does not sound like a London wide-boy wanker-banker in red braces, or an idiot toff, or a NuLab apparatchik. We all know that the world is fucked!!!!!! and that the fuckers who fucked it are fucking fuckers!!!!!! What the world wants now to hear is solid, rational, calm, clear, convincing, downbeat, unphotogenic, untheatrical talk about why things are as they are, and what to do about it, from people who never use the word fuck in public from one month to the next, and above all who do not, at all, in any way, look or sound like the people who got us all into this mess.
I took the snap to the right in Sheffield when I visited The Dowd a few weeks back. A bit light-drenched, but it will do, along with the snap here.
I have a busy day of gizmo-searching (see previous posting from last night) but will try to get back to watching this vid later this afternoon and evening, and to saying more about it. My hope always was, and is now, that I will have a lot more to say about the various themes in this lecture, and happily for me, I actually think that this is how it will be.
Meanwhile, Johnathan Pearce of Samizdata has already written some longer thoughts about it all, having already been there on the night. Not yet read that either, but that shouldn’t stop you.
That’s me on the right and him on the left. I’ll try to do more tomorrow, but I promise only what I always promise each day here, namely: something.
Today Professor Dowd took me to see the Monsal Valley in the Peak District, A wonderful trip.
Here is the sign on top of the Monsal Valley railway viaduct, or rather two croppings from it. The first is what John Ruskin said about it around the time (1867) when it was built:
And here is what he was moaning about:
And here’s how it looks now:
More about and more photos of this viaduct here. The railway it carried is now a scenic footpath, and we made our way down into the valley and walked over it and back. We had the best of the day’s sunshine for our little expedition. Lovely.
Billion Monkeys never forget to photo the explanatory signs!
This morning, having only got to sleep at 4 am, I got up at 9.30am. In other words I exploited the Old Git tendency to wake up half way through the night, by simply forgetting about the other half. I need to reset the Micklethwait Clock, if only because I am staying with Professor Dowd in Sheffield this weekend, and will simply have to be getting up at a sensible hour. Also, I have to get up early tomorrow to pack before catching the bus there.
Which meant that I got my blogging duties here out of the way good and soon, and that I found the time also to write this.
Because of that latter piece, I am now feeling very smug. This is one of those cases where my mere eloquence is actually going to make the world a better place, to a small but definite degree. Having only written it this morning I cannot be entirely sure yet, but I strongly suspect that if and when (I promise nothing) I get around to compiling Brian’s Greatest Blog Postings, this will feature.
Here. TARP stands for Troubled Assets Relief Program. The bail-out, in other words.
In this short Samizdata posting I stated yet again the notion that although libertarianism (which here I simply called “sanity") has clearly been losing the early policy battles associated with all this financial turmoil, it may yet win the ideological war, a notion first floated by me here. Now is the time for all good libertarians, de dum de dum, because here is a battle we might very well win, big, and quite soon, the way the socialists won the Great Depression ideological battle last time around. In this spirit, I will be journeying up to Sheffield next weekend to visit Professor Kevin Dowd, to help him prepare his Chris Tame lecture, and to learn more about how I can beat the drum for it.
SIR – The Government’s policy towards the financial crisis is clearly not working. Having “saved” the banking system with the big bail-out last October, it now turns out that the banking system needs another big bail-out three months later, and the plunges in the banks’ share prices last week suggest that this second bail-out is not working either.
The Government’s blundering is leading towards the piece-by-piece nationalisation of the banking system, with no thought-through solution to the underlying problems.
Any solution has to provide a framework within which banks can restructure their balance sheets and restore their financial health. Were these institutions anything but banks, the obvious answer would be for them to go into receivership. Their assets would be written down and creditors’ claims on those assets would be cut; they could then be recapitalised and returned to normal operations.
Yet, radical as it might appear, this same receivership-recovery model can also be applied to banks. It could be implemented via formal receivership, as existing law provides for, but could also form the basis of a government rescue package that would stop further losses being inflicted on taxpayers.
The key elements would involve: write-downs on assets; write-downs on banks’ debts (for example, swaps of deposits for equity, with exemptions for smaller depositors); and measures to minimise disruption to banks’ ongoing ability to provide both credit and payment services (including ensuring that the rescue took place over the weekend).
The combination of asset write-downs and fresh equity would restore confidence and put the banks on a sound footing again.
Prof Kevin Dowd
Centre for Risk and Insurance Studies, Nottingham University Business School
What is so excellent about this is that Dowd absolutely does not confine himself to complaining about what the Government is doing. He also says what it should be doing instead. In my posting on Friday I said:
… the whole British Establishment will be yelling to the anti-bail-out mob (i.e. us): Well what the hell do you think we should be doing? If Dowd answers that question eloquently and with precision, and does not confine himself merely to denouncing the current blunders, then he could become a major figure.
It’s almost as if he read that, decided that he would like to be a major figure, and then wrote his letter. Not what happened I’m sure, but profoundly encouraging nevertheless.
I left a comment there, and here it is again:
The Dowd talk, depending on just how good it is, could be huge. The timing is absolutely perfect, although I guess the LA got lucky rather than clever with that. March 17 looks like being, almost to the day, the moment when the Just Throw Money At It policy will have collapsed in ruins so ignominiously ruinous that the whole British Establishment will be yelling to the anti-bail-out mob (i.e. us): Well what the hell do you think we should be doing? If Dowd answers that question eloquently and with precision, and does not confine himself merely to denouncing the current blunders, then he could become a major figure.
For libertarians, this man is a godsend. He is both an unswervingly principled libertarian and an expert (long before such expertise suddenly became topical) on all the details of banking regulation and monopoly money which the rest of us know the broad (and bad) outlines of but not the nitty gritty. (I exclude Paul Marks from this generalisation. He was raging here about “Ponzi schemes” here, long before the phrase hit the headlines.)
Never in my entire life have I been more eager and anxious (i.e. that he hits the various nails on the head) about a mere speech. I’m actually more nervous about this event than about any speech I have ever given myself, not because it could be bad, but because it could be so, so good, and must be.
That last bit is odd, I do agree. But true. I am actually getting very nervous about this event. Will it be as big as I hope, or just be a tiny plop in the great pond that is public and chattering class opinion? I really, really hope it hits home.
We probably won’t win the current battle, in the sense of getting most of the right things done Real Soon Now. But we have a very decent chance of winning the ideological war, in the sense of deciding the lessons that are learned from this balls-up, the way that the statists won the ideological war last time around.
See also this posting, which I am getting more and more sure about, even though in it I described the failures of government policy rather poorly. Government borrowing is only the beginning of the problem. It was how the government encouraged so many others to borrow with equal recklessness that is at the heart of the catastrophe. But at least the title of the posting relates to the best bit in it, which I summarised thus:
My understanding of depressions, which is what we are talking about here, is that they discredit whatever is the Official Story, and credit whatever is the Most Confident Alternative that is being put about, even though it takes a while for the Most Confident Alternative to get a respectful hearing.
Which is not to say that we will automatically be that Most Confident Alternative; merely that we must try like hell to be, and hope we manage it.
Luckily mere weight of numbers doesn’t matter at all, in situations like this. Confidence and coherence is all. One man talking sense and clearly meaning it trumps thousands merely bellowing with pain and rage but having no clear idea of what to do.